When Insurance Fraud
Strikes, Ripples Affect UK Insurance Holders
In 2009, according to the Association of
British Insurers (ABI), £9.9 billion of the net insurance premium of
£30.5 billion were from car insurance premiums. According to the Annual
Fraud Indicator insurance fraud nets £2.1 billion annually. For every 6
insured motorists, at least 1 files a claim each year, amounting to
£20.4 million. UK insurance policyholders should be aware of what
constitutes fraud and its consequences.
When an insurance employee, agent or an impostor deceives an insurance
company or consumer for monetary gain, insurance fraud has been
committed. Fraud can also be committed by medical staff, policyholders
and others when filing a false claim or exaggerating a legitimate claim.
Falsifying documents, providing false statement, personally pocketing
premiums, and selling illegitimate insurance are among the types of
fraud committed by insurance agents, representatives and other insurance
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Arson, disaster, auto accidents that did
not happen or were deliberate, claims that exaggerate loss, claims that
misrepresent services rendered or cost, and driving related scams are
among the common types of fraud committed by those who are not insurance
agents, representatives or impostors.
The consequences of insurance fraud include increased policyholder
premiums. Fraudulent claims expend money unnecessarily to cover
improperly reported or unnecessary repairs, non-existent property
damage, property misreported as stolen, and injuries that do not exist
or were not properly charged. Legal requirements dictate that premiums
must be balanced to meet capital and surplus. Businesses affected by
fraudulent insurance fallout also may transfer the increased costs for
vehicle insurance to consumers.
Higher premiums may reduce insurance products and services demand, and
reduced demand can lead to job losses. The UK insurance industry
outranks all others in Europe and is 3rd in the world. Over 275,000
people are employed in the insurance industry in the UK (ABI). Delivery
based businesses such as florists, caterers and taxi services may pass
along costs to consumers, decrease products or services, or shut down.
For those charged with criminal insurance activities, prosecution can
lead to penalties, fines and imprisonment.
Insurance companies themselves have liability insurance cover to protect
them against claims. For example, a fidelity bond provides casualty
insurance protection for businesses which experience disreputable
employee conduct. This insurance also affords cover to policyholders for
fraud committed by specific persons. Errors and omissions insurance
provides liability insurance for a variety of business professionals
including insurance agents.